As of August 3rd US EST, early morning, the ChainLink cryptocurrency (LINK) holds its’ price steady. LINK is an important attempt to make smart contracts work beyond their known limitations. ChainLink attempts to enable smart contracts to access data outside a blockchain in a secured manner.
However, at the time of writing, the project team has a limited focus on their marketing. This results in a lack of understanding about the project and its’ long-term prospects in the crypto market. As you can see in the below chart, ChainLink hasn’t appreciated significantly.
ChainLink Token Price Analysis – August, 2018
Understanding smart contracts first, to understand the context of the ChainLink token
Before I can explain the importance of ChainLink, I need to explain what smart contracts are.
Smart contracts enabled the blockchain technology to spread beyond the Bitcoin decentralized payment network. Bitcoin has one primary use case, and that’s enabling people to make payment transactions in their disintermediated Peer-to-Peer (P2P) network.
However, the Ethereum project introduced the Ethereum Virtual Machine (EVM) and smart contracts. Smart contracts are pieces of code that enable transfer of crypto tokens based on fulfillment of predetermined conditions.
A smart contract code is open-source, and developers code the contractual terms and conditions (T&Cs) within them. Smart contracts are deployed in a decentralized blockchain, and you can’t modify the code once you deploy them.
They execute automatically, and you can’t reverse the execution outcomes. Both the code and execution results are available for viewing in the blockchain. Read more about smart contracts in this Investopedia definition.
Smart contracts have allowed developers to build distributed apps (DApps) using the Ethereum blockchain platform. Blockchain and crypto entrepreneurs have launched many new cryptocurrencies using Ethereum smart contracts. These have brought the promising blockchain technology in front of the larger world and have created many new business models.
Smart contract limitations and the emergence of ChainLink:
However, smart contracts have a limitation, because it can’t access data outside the blockchain network directly. Suppose you want to build a blockchain DApp that uses securities market data. You will have to deal with the problem that your smart contracts can’t access the reputed securities market data-feeds.
The Ethereum blockchain community tried to solve this issue using an ‘Oracle’ concept. Don’t confuse it with the famous Oracle database. These ‘Oracles’ are centralized repositories of data outside blockchain, and these will feed their data to smart contracts.
However, this approach has a serious risk. Remember Oracles are data-sources outside the blockchain, which means they are decentralized. They don’t have the same level of security that a decentralized blockchain has.
Data in Oracle is open to tampering. What happens when you depend on this data in your DApp or new cryptocurrency project? Even if your DApp enjoys the security the blockchain offers, your input data may not! Tampered input data can make your DApp give wrong results.
ChainLink intends to solve this issue.
How ChainLink solves the problem of centralized Oracles:
ChainLink does the following to solve the problem of centralized Oracles:
- The project creates a decentralized Oracle network.
- Smart contracts verify the accuracy of the Oracles on the network.
- The ChainLink network also uses smart contracts to perform order match and to aggregate results.
- It then passes on the Off-chain Oracle data to the On-chain smart contract of the requesting DApp.
- The network compensates the participating Oracle data-source entities using the LINK token.
The ChainLink network currently works with Ethereum smart contracts.
The ChainLink project team, partnerships, and outlook
Sergey Nazarov and his team have built the ChainLink project. The project team had an Initial Coin Offering (ICO) in 2017, which ended on September 19th of that year, with a token price of US $ 0.091. The token trades mostly on the Binance exchange.
The project has a partnership with SWIFT. SWIFT is the largest global provider for secure international financial transactions. Top banks in the world use SWIFT to conduct their international wire transfers.
The ChainLink project also arrived at a partnership with ZeppelinOS, which is a major smart contract services platform. They clinched this partnership in December 2017.
However, the project team is quiet in terms of their marketing effort. While they are present on social platforms like Twitter and have a Reddit presence, they don’t frequently update their project status.
The main competitors of the ChainLink network are SophiaTX and OracleChain, however, OracleChain focuses on the EOS blockchain network. The ChainLink team updates their GitHub repository, however, they haven’t presented a clear roadmap for 2018.
A price prediction for LINK in 2018:
Experts don’t consider LINK to be a good investment. This is because the team lacks the necessary marketing effort.
We recommend that you analyze the project, its’ prospects, and the risks before you invest in it. While a superior technical idea is good, it may not compensate for a sub-optimal marketing, and this is the basis of our advice.
The Wallet Investor price prediction doesn’t term it as a good long-term investment. Read their advice in “ChainLink Price Prediction, LINK Forecast – Is ChainLink a Good Investment?”.